Oil jumps after Trump rejects Iran’s response to peace-talk offer; Bibi digs in

(Originally published May 11 in “What in the World“) Oil prices rose after Trump said he was unhappy with Iran’s response to his peace-talk proposal.

Brent crude futures climbed 3.2% to $104.50/bbl after Trump posted: “I have just read the response from Iran’s so-called ‘Representatives.’ I don’t like it—Totally unacceptable.” Trump has declared the hostilities to be over, but U.S. and Iranian forces traded fire last week, with the U.S. attacking two Iranian ports on the Strait of Hormuz as part of what it said were “self-defense” strikes against Iranian drone and missile attacks against three U.S. destroyers.

Israeli Prime Minister Benjamin Netanyahu fueled oil’s rally by contradicting Trump with a remark that the conflict with Iran is “not over.” While the two sides remain at loggerheads, the Strait of Hormuz remains shut to shipping.

Investors are now reportedly swapping their optimistic “Taco” trade (for “Trump always chickens out”) for a new “Nacho” (Not a chance Hormuz opens) bet on persistently higher oil prices and inflation, contributing to slower real global economic growth.